In this document you will find a summary for the course Ethics and International Business given at the University in the second year of the bachelor's degree in International Business and in the pre-master's degree in Finance. The summary contains the most important concepts and theories from the b...
Ethics and International Business Summary 2021-2022
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Rijksuniversiteit Groningen (RuG)
International Business
Ethics And IB (EBB608B05)
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Ethics and International Business 2021-2022
Chapter 1) The Nature of Morality
Moral standards: Moral principles and values we accept.
Ethics deals with individual character and the moral rules that govern and limit our conduct. It
investigates questions of right and wrong, fairness and unfairness, good and bad, duty and
obligation, and justice and injustice, as well as moral responsibility and the values that should guide
our actions.
Business ethics is the study of what constitutes right and wrong (or good and bad) human conduct in
a business context.
We appeal to moral standards when we answer a moral question or make a moral judgement. Three
characteristics of moral standards distinguish them from other kinds of standards:
1. Concerns behaviour that seriously affects human well-being → it can profoundly injure or
benefit people.
2. Takes priority over other standards.
3. Its soundness depends on the adequacy of the reasons that support and justify them.
Etiquette: the norms of correct conduct in polite society/any special code of social behaviour or
courtesy.
Professional codes of ethics are the rules that are supposed to govern the conduct of members of a
given profession. Adhering to these rules is a required part of membership in that profession.
Morality must be distinguished from etiquette (rules for well-mannered behaviour), from law
(statutes, regulations, common law, and constitutional law), and from professional codes of ethics
(the special rules governing the members of a profession).
Divine command theory: the only reason something is wrong is because God commands us not to
do it.
Ethical relativism: what is right is determined by what a culture or society says is right.
The paradox of hedonism: people who are exclusively concerned with their own interests tend to
have less happy and satisfying lives than those whose desires extend beyond themselves.
We can distinguish morality in two ways:
1. Morality in the narrow sense concerns the principles that do or should regulate people’s
conduct and relations with others.
2. Morality in the broad sense concerns the values, ideals, and aspirations that shape our lives.
Aspects of corporate structure and function that undermine individual moral responsibilities:
- An employee’s degree of commitment – accepting and subordinating one self to
organizational norms and goals – can lead people to act unethically.
- Group think happens when pressure for unanimity within a highly cohesive group
overwhelms its members’ desire or ability to appraise the situation realistically and consider
alternative courses of action.
- Diffusion of responsibility inside an organization leads individuals to have a diluted or
diminished sense of their own personal moral responsibilities. Employees tend to see
themselves as small players in a process over which they have no control and for which they
, are unaccountable. Bystander apathy: the phenomenon that in emergencies, we seem
naturally to let the behaviour of those around us dictate our response.
Moral reasoning
An argument is a group of statements, one of which (conclusion) is claimed to follow from the
others (premises). In valid arguments, the premises logically entail the conclusion. In invalid
arguments, one can accept the premises as true and reject the conclusion without any
contradiction; the premises do not entail the conclusion.
A counterexample is an example that is consistent with the premises but is inconsistent with the
conclusion.
Sound arguments have true premises and valid reasoning. Unsound arguments have at least one
false premise, or invalid reasoning, or both.
Moral arguments: arguments whose conclusions are moral judgements. The first premise in each of
these arguments is a moral standard, the second an alleged fact, and the conclusion is a moral
judgement.
Chapter 5) Corporations
A modern corporation is made up of (1) stockholders, who provide capital, own corporation, and
have limited liability; (2) managers, who run the business operations; (3) employees, who produce
goods and services.
Corporations are legal entities, with legal rights and responsibilities similar but not identical to those
enjoyed by individuals. Business corporations are limited-liability companies → their owners or
stockholders are liable for corporate debt only up to the extent of their investments.
The narrow view of corporate responsibility: business has no social responsibilities other than to
maximize profit. An important proponent is Milton Friedman, he contends that diverting
corporations from the pursuit of profit makes our economic system less efficient. Managers have a
fiduciary responsibility to look after the interest of shareholders.
The broader view of corporate responsibility: corporations have other responsibilities besides
making profit – to consumers, to employees, to suppliers and contractors, to the surrounding
community, and to society at large (stakeholder model → obligation is to all parties that have a
legitimate interest in what the corporation does or doesn’t do). An important proponent is Keith
Davis, who stresses that modern business is intimately integrated with the rest of society.
Corporations must take responsibility for the unintended side effects of their business transactions
on a third party (externalities) and weigh the full social costs of their activities.
Three arguments that support the narrow view:
- Invisible hand argument: Adam Smith claimed that when each of us acts in a free-market
environment to promote our own economic interests, we are led by an invisible hand to
promote the general good. It will inevitably yield the greatest good for society as a whole
when everybody acts out of self-interest.
- Let-government-do-it argument: the strong hand of governments (through a system of laws
and incentives) can and should bring corporations to heel (bring under control).
- Business-can’t-handle-it argument: corporations are the wrong group to be entrusted with
broad responsibility for promoting the well-being of society. They lack the necessary
expertise and they inevitably impose their own materialistic values on the rest of society.
, Four things corporations should do to make ethics a priority:
1. Acknowledge the critical importance of conducting business morally.
2. Encourage members/employees to take moral responsibilities seriously.
3. Be open to public discussion and review.
4. Recognize the pluralistic nature of the social system of which they are part.
Law professor Christopher Stone gives three reasons why there are limits to what can be achieved
through law:
1. Laws are often too late: many laws are passed only after there is general awareness of the
problem; in the meantime, damage has already been done.
2. Formulating appropriate laws and designing effective regulations are difficult.
3. Enforcing the law is often cumbersome. Legal actions against corporations are expensive and
can drag on for years, and the judicial process is often too blunt an instrument to use as a
way of managing complex social and business issues.
Chapter 2) Normative Theories of Ethics
Normative theories propose some principles for distinguishing right actions from wrong actions.
Normative theories can be divided into two subcategories:
1. Consequentialist theories: the moral rightness of an action is determined solely by its
results. If consequences are good, then action is right; if they are bad, the action is wrong.
a. Egoism: an act is morally right only if it best promotes the agent’s own interest.
b. Utilitarianism: One must take into account everyone affected by the action.
2. Non-consequentialist theories: right and wrong are determined by more than just the likely
consequences of an action.
Consequentialist theories
Egoism: an act is morally right only if it best promotes the agent’s own interests.
There are two kinds of egoism:
- Personal egoists claim that they should pursue their own best interests, but they do not say
what others should do.
- Impersonal egoists claim that everyone should let self-interest guide his or her conduct.
According to egoism, we should assist others when doing so best promotes our own interests.
Psychological egoism: People are by nature selfish; all actions are selfishly motivated, thus truly
unselfish actions are impossible.
Objections to egoism:
1. It can be argued that some actions are not purely out of self-interest. People have other
than self-interested desires.
2. Egoism misunderstands the nature and point of morality, which serves to restrain our purely
self-interested desires so we can all live together.
3. Egoism sometimes approves actions that are blatantly immoral (e.g., fraud, theft, murder)
Utilitarianism: we should always act to produce the greatest possible balance of good over bad for
everyone affected by our actions.
Jeremy Bentham viewed a community as no more than the individual persons that it comprises. The
interests of the community are simply the sum of the interests of its members.
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